Wednesday, March 16, 2011

Showing Buster Posey the Money

Jeff Fletcher wrote that it's in the Giants best interests to lock up Buster Posey to a long-term deal sooner rather than later so they can employ him at a reasonable rate. I think this is a great idea and one that can keep him in a Giants uniform for a long time at a price that doesn't cripple the payroll.

The hard part is determining what a fair price is for a deal like this. With any long-term deal, the player should give a discount for having the certainty of a guaranteed contract. The longer the deal, the more of a discount is usually given. The other factor at play here is that some of the years are pre-arbitration where the team sets the contract and the player accepts it or doesn't play (the old vestiges of the reserve clause). Some are arbitration years and some are free agent years, which all have different costs.

The way Fletcher sees things, he suggests a deal that is structured like this:

2011: $600K
2012: $900K
2013: $2.5M
2014: $5M
2015: $8M
2016: $10.5M
2017: $12M option or $4M buyout (first free agent year)
2018: $15M option
2019: $15M option

To me, this would be a great bargain for the Giants and if Posey was willing to accept it, they should get this deal done before he changes his mind. I think the problem that Fletcher suffers from is he's looking back for comps and not taking price inflation in the future into account. I project things a little different and come to a different price:

I give Posey a pretty average looking aging curve, with his peak seasons coming at his age 28 and 29 seasons. I expect that as a catcher, he won't necessarily have a graceful age and it will decline rather quickly.

My other assumption is there will be 5% salary inflation per year (probably too low but I wanted this to be conservative) with a starting marginal win value of $5 million. My other assumption is for his first two pre-arbitration years, he gets paid what Fletcher suggests because that sounds about right to me. For the other years, he gets 30%, 40%, 50%, and 60% of his marginal value. Then the club has options at 70% of his marginal value.

To make this really simple, the Giants get a huge discount on his open market value and Posey gets a guaranteed paycheck. Here is how my offer would break down:

2011: $600K
2012: $900K
2013: $7.5M
2014: $12M
2015: $16.5M
2016: $21M
2017: $25M option or $5M buyout (first free agent year)
2018: $25M option
2019: $25M option

That is a guaranteed deal of $63.5 million and it could be worth as much as $133.5 million with all the options picked up. That sounds like a lot of money, but for the Giants, that still gives them a projected surplus of $132.9 million, so the Giants are paying a little less than half of what he is worth on the open market.

I would love for the Giants to get Posey to sign for Fletcher's contact, but I just imagine that it's not enough. I did everything to try to push the estimate down. I assumed a low rate of salary inflation (much lower than the last 10 years), I was conservative in my projections of his value (if you imagine that Joe Mauer is a good comp, he has posted three seasons above Posey's career apex and is only 27), and I gave a big discount for the guarantee.

Posey is going to be expensive to sign to a long-term deal, but it will be worth it.

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